Korea-U.S. free-trade agreement will cost jobs

The Obama administration’s trade policy has a huge flaw. It promotes exports but fails to address imports, which is a big mistake. This flaw is highlighted by Undersecretary of Commerce Francisco Sanchez’s image of “trucks traveling down the (Highway) 101 loaded with everything from produce to electronics,” as it neglects the job-killing side on trade.

In his op-ed, Sanchez fails to mention the less photogenic images of thousands of manufacturing plants closed since the North American Free Trade Agreement (NAFTA) took effect in 1994. Unfortunately, this has become the norm for the Obama administration’s trade spokespeople, as they promote another NAFTA-style free trade agreement with South Korea.

Efforts to increase exports create net job growth only if they are accompanied by decreases in imports. Sanchez mentions that the South Korea free trade agreement will increase exports, but fails to mention that, according the U.S. International Trade Commission, imports will grow faster, increasing our nearly $500 billion trade deficit. The president and administration officials have often claimed export increases from the South Korea pact will support 70,000 jobs, which is true. Unfortunately, when including imports, the Economic Policy Institute predicts a net loss of 159,000 U.S. jobs.

This outlines the systemic problem with both the National Export Initiative — the president’s plan to double exports in five years — and the undersecretary’s mission to “support U.S. jobs by increasing export opportunities.” Thus, the International Trade Administration connecting potential exporters to overseas markets is helpful, as it increases exports largely independent of imports.

However, export increases from the South Korea free trade agreement will be linked to more significant increases in imports, as evidenced by both the projections from the USITC and a history of free trade agreements creating import growth that far outpace export growth.

In 1991, before the adoption of NAFTA, the U.S. international trade deficit was $31 billion. Due largely to NAFTA and China joining the WTO, that trade deficit grew 2,400 percent to a pre-recession high of $759 billion in 2006.

This myopia is familiar, as NAFTA-boosters in the early 1990s also predicted job growth due to new export opportunities while failing to heed warnings that import growth would overwhelm such advantages. Nearly 20 years later, 1 in 3 manufacturing jobs are gone, 90 percent of American workers have suffered stagnant wages, and California’s unemployment rate is 12.3 percent.

The administration is right that our trade deficit is hindering our economic recovery, but wrong to ignore the import side of it. In the long-term, we need to address this situation by setting and enforcing rules that protect U.S. interests from the exploitative practices of China and other countries. For China, properly valuing the yuan, stopping government subsidies to industry and improving worker and environmental conditions would all help reduce the $275 billion U.S. trade deficit with China, creating thousands of jobs.

In the short-term, we need to rid ourselves of the notion that all methods of increasing exports are beneficial, and realize that free trade agreements like the South Korea pact cost jobs.

If President Obama and his team are serious about using trade to create jobs, which they should be, they will abandon the so-called free trade system and work for policy that actually helps U.S. industry, protects U.S. workers and creates U.S. jobs. To do so, they really have to stop ignoring half of the trade equation.

Tim Robertson is director of the California Fair Trade Coalition. Its mission is reform U.S. trade policy to strengthen our economy, create and protect jobs, and promote democratic, equitable, and sustainable growth in California and around the world.